Ten turns to billionaire boardroom backers after large loss

PETER LLOYD: Well, the billionaires are bailing out Channel Ten again. The beleaguered network is $285 million in the red.

Shareholders and directors Lachlan Murdoch, James Packer and Bruce Gordon rode to the rescue to underwrite an unconditional $200 million loan.

Business reporter Michael Janda has more.

MICHAEL JANDA: In business, "challenge" is the euphemism for problems.

HAMISH MCLENNAN: FY (financial year) 2013 was a challenging year for Ten Network. Our results reflect the impact of difficult trading conditions in the television advertising market and an unsatisfactory ratings performance.

HAMISH MCLENNAN: Although prime time is the main game in terms of ratings and revenue, off-peak offers valuable audience and revenue opportunities.

This year Network Ten has maintained its number-one ranking in daytime, 9am to 6pm, for the 13th consecutive year, thanks to successes such as Judge Judy, Ten Eyewitness News and The Bold and the Beautiful.

MICHAEL JANDA: But daytime dominance doesn't bring in the big bucks and Ten disappointed investors by posting a $5 million underlying loss, after hundreds of millions of dollars in one-off write-downs were excluded.

HAMISH MCLENNAN: There are potential savings which is good to see that won't compromise the way we operate the business and we'll just maintain a very tough focus on controlling those costs.

MICHAEL JANDA: The downward spiral of cutting costs to keep pace with falling revenues is the trap many media companies have fallen into, losing even more audience share in the process.

Ten is hoping to re-invest any further cost savings in new programming to boost ratings in the main 25-54 year old age group.

But media analyst Mark McDonnell from BBY says that will take time.

MARK MCDONNELL: The turnaround that they're trying to achieve is more than one year's work.

MICHAEL JANDA: Some of the company's billionaire owners and directors are underwriting that turnaround, guaranteeing a large, unconditional loan.

Ten's Paul Anderson.

PAUL ANDERSON: The new financing facility is a four-year $200 million revolving cash advance facility with the Commonwealth Bank of Australia. The facility has no financial covenants. It is guaranteed by entities associated with Bruce Gordon, Lachlan Murdoch and James Packer.

MICHAEL JANDA: But they're not doing it out of charity.

PAUL ANDERSON: The shareholder guarantors will receive a fee and will be fully secured against the assets of the company.

MICHAEL JANDA: The facility will need shareholder approval because it involves some of the company's directors.

But Mark McDonnell says it, and other cash injections by the broadcaster's wealthiest shareholders are keeping Ten alive.

MARK MCDONNELL: I do think it will survive and, in fact, one of the important features of the last year is that its overall debt position has been dramatically reduced by about $235 million, but that was entirely as a result of the people we've just mentioned and some others putting in significant new capital.

MICHAEL JANDA: Now, you say the company's current reduction in its debt position and its stabilisation is largely due to those major shareholders. Do you see much prospect that they may even form some sort of consortium to take the company off the market if they continue putting much more money into it?

MARK MCDONNELL: Well, we can only speculate about that. I mean, there's certainly no announcement to that effect. The role of independent shareholders, however, is one that's somewhat more on the margins, perhaps, than in many companies, given that the large shareholders are well represented in the board.

MICHAEL JANDA: Not that Mr McDonnell sees much value in the company, even at its current share price of just 28.5 cents. He rates it "underperform."

MARK MCDONNELL: It means in effect that, I think, the value is less than the current share price.

MICHAEL JANDA: Perhaps the best that Ten can hope for is to emulate one of the hosts of its upcoming winter Olympic coverage.